How the CJC’s litigation funding reforms aim to restore certainty after PACCAR

Litigation funding has become a critical part of how individuals and businesses pursue complex claims, but the landscape has been anything but stable since the Supreme Court’s decision in PACCAR Inc v Competition Appeal Tribunal (PACCAR). 

With legal fees and disbursements alone often costing hundreds of thousands and sometimes millions of pounds, many claimants relied on third‑party funders to cover those costs, usually in return for a share of any damages if the case succeeded. When the Supreme Court in PACCAR determined that such funding agreements weren’t enforceable, it created uncertainty not only for domestic litigation but also for London’s position as a leading seat for international arbitration.

The Civil Justice Council (CJC) has now published its final report on litigation funding, calling for a simple “light‑touch” regulatory framework and a legislative reversal of PACCAR. Released on 2 June 2025, the report aims to restore confidence and bring much‑needed clarity to a market that has faced significant disruption since the 2023 ruling.

Here, Helen Otty, Georgina Rothwell and Eleri Gibbs examine the CJC’s recommendations and their implications for funders, claimants and practitioners navigating this evolving area.

Types of litigation funding

Litigation funding agreements (LFAs) and damages‑based agreements (DBAs) sit at the heart of the reforms.

LFAs

An LFA is a contract with a third-party funder. This means that the funder agrees to pay some or all of your legal costs and disbursements. If you win your case, the funder takes a pre-agreed return. Since PACCAR, this has been largely restricted to a multiple of the capital invested, with the multiple increasing as the case continues. If you lose, the funder normally gets nothing, although it’s almost always a pre-condition of funding that you purchase — as part of the funding or separately — insurance to cover the other side’s costs. LFAs are widely used in large commercial disputes and group actions as they allow claimants to avoid some or all of the costs of bringing claims.

DBAs

A DBA, on the other hand, is an agreement between you and your lawyers. Instead of charging you legal fees, your lawyers take a percentage of the damages if you win. If you lose, they usually don’t charge for their work (though some expenses may still apply). DBAs are heavily regulated and were designed for lawyer–client arrangements, not for third-party funders.

The PACCAR problem

In PACCAR, the Supreme Court held that certain LFAs were actually DBAs, re-labelling many funding contracts overnight. In so doing, the Court rendered many existing agreements unenforceable since they didn’t comply with the strict and often impractical requirements of the DBA regime. 

This ruling caused widespread disruption and was particularly problematic for group litigation and competition claims where third-party funding isn’t only common but often essential. The uncertainty created by PACCAR left funders, claimants and their legal teams scrambling to find compliant and commercially viable alternatives.

In a recent example of how funders and claimants have had to adapt, the Competition Appeal Tribunal (CAT) in Alex Neill Class Representative Ltd v Sony Interactive Entertainment approved a revised LFA that included a conditional clause: the funder would only take a percentage of damages if it was “enforceable and permitted by applicable law”.

While this workaround was necessary to avoid falling foul of PACCAR, it also highlighted the legal gymnastics now required to keep funding agreements viable.

The CJC’s recommendations: clarity & confidence

To address these challenges, the CJC’s report recommends that the Government pass legislation to reverse PACCAR, both retrospectively and moving forward. This would restore the legal certainty that funders and litigators had relied on for years.

Key recommendations include:

• A statutory framework for regulating funders introduced via regulations made by the Lord Chancellor.
• No cap on funders’ returns, rejecting calls for profit limits that could deter investment and restrict access to justice.
• Greater transparency, including early disclosure of the fact of funding and the identity of the funder but not necessarily the terms of the agreement.
• Tailored protections for consumers and claimants in group litigation while maintaining a lighter regulatory touch for commercial disputes.

The CJC’s proposed light-touch regulation draws inspiration from the European Law Institute’s (ELI) principles on litigation funding. These principles advocate for transparency, fairness and proportionality — values echoed in the CJC’s call for early disclosure of funders’ identities and the rejection of rigid caps on funders’ returns.

The Government’s legislative response

The Government has already taken action to address these concerns. In March 2024, it introduced the Litigation Funding Agreements (Enforceability) Bill (the Bill) which seeks to clarify that LFAs aren’t DBAs.

Crucially, the Bill is retrospective, meaning that it would validate previously unenforceable agreements and reduce the risk of costly satellite litigation. 

This move has been welcomed by funders and claimant lawyers alike who see it as essential to preserving the UK’s position as a global hub for commercial litigation and restoring confidence in London as a leading seat for international arbitration, where recent uncertainty around funding had caused concern.

What this means for clients & litigators

If the CJC’s proposals are adopted, the litigation funding landscape could become significantly more stable and accessible. 

We can expect:

• Renewed confidence in funding arrangements.
• Simplified arrangements without the need for complex legal workarounds.
• Improved access to justice, particularly for claimants in group actions and consumer claims.

However, the report also signals a shift toward greater scrutiny. Funders’ identities and the fact of funding will need to be disclosed early in proceedings and standardised LFA terms may soon become the norm.

What’s not changing (yet)

Interestingly, the CJC doesn’t recommend Financial Conduct Authority (FCA) regulation at this stage. Instead, it proposes a bespoke regime under the Lord Chancellor’s remit, with a review in five years. This approach balances the need for oversight with the flexibility required to support innovation in funding models.

Practical implications

The reforms signal a shift toward more standardised funding practices. 

This could mean:

• Developing template-compliant LFAs aligned with the new statutory framework.
• Training teams to identify and mitigate risks in legacy agreements.
• Advising clients on the strategic use of funding in light of the evolving regulatory landscape.

What should you do now?

While we wait for the Government’s formal response, litigation teams should take proactive steps to:

• Review existing LFAs for compliance and potential risk exposure.
• Monitor the progress of the proposed legislation.
• Prepare for a more transparent and regulated funding environment.

Talk to us

Our award‑winning litigation team is closely monitoring developments in the post‑PACCAR landscape and actively preparing clients for the reforms ahead. We can help you to review existing funding arrangements, assess any exposure created by PACCAR and advise on the most effective strategy for future claims.

If you’d like to understand how these changes could affect your position or your litigation strategy, talk to our team by calling 0333 004 4488, emailing hello@brabners.com or completing our contact form below.